@MommaTraveler the simplest would be for the Estate to show sale of the asset with no-gain/noloss -- basis equal to FMV and sold at FMV . Then on K-1 it shows the distribution of the resultant cash to you. Since this is cash on your K-1 shown as distribution from the decedent's estate to you there is no taxable income.
Thew other way would be for you to recognize the asset as yours acquired by way of inheritance with Basis as FMV, you sell at FMV and therefore no loss/gain for you on your personal return.
I would think that the fact that you never transferred the title to your name, may make it easier for the estate to recognize the sale. However, if you are also the executrix of the Estate and beneficiary, whether you sold it or the Estate sold it makes no difference ( but the Estate sale may make it cleaner -- especially if you are in a state like California where the Trustee/Executrix is generally prohibited from having any ownership role while performing the work of the other role ( but again it depends on the facts and circumstances ).
If you want I can research this area more or call on one of our experts on the subject ( Domestic Trust / Estate ).
pk
